Have your say on rent as evidence that people can meet mortgage repayments

UKParliament · 26 September 2017 at 9:23AM

Do you think lenders should use rent payments as evidence that people can meet mortgage repayments?

MPs want to hear your views on a petition calling for paying rent to be enough proof that people are able to meet mortgage repayments. The petition reads:

“Make paying rent enough proof that you are able meet mortgage repayments

Since living on my own I have paid £70,000+ in rent on time yet still struggle to get a mortgage. Unless you’re getting handouts, wealthy or in receipt of inheritance it's almost impossible. I want paying rent on time to be recognized as evidence that mortgage re-payments can be met.”

In particular, the Petitions Committee want to hear your views on:

Do you agree with the petition? Why/ why not?
What other things do you think mortgage lenders should take into account when assessing eligibility?
How much do you think the UK Government and Parliament should interfere with the eligibility criteria mortgage lenders use? Is this a decision that should be made by banks and building societies? Or should the Government and Parliament play a role?

Contributions posted on this thread before 18 October will be summarised and shared with MPs taking part in a debate on this petition.

Watch the debate from 4.30pm on Monday 23 October 2017 on Parliament TV.

harshitguptaiitr · 26 September 2017 at 9:38AM

1 - The credit application system is designed to be anti-shop around. Someone looking for credit (mortgage, loan, credit card) won't know for sure if they will get it or not unless they apply for it, which leaves a mark on their credit file and affect their chances of getting the credit elsewhere. MSE has credit club which gives a guideline but the outcome is not 100% guaranteed.

2 - Paying rent every month on time is not reported to credit reference agencies and hence not added onto credit file or credit score. All letting agents and landlords should have a system of reporting rent payments to Experian. This will make sure lenders are able to use the rent payment as an input towards making decision on granting credit or not.

kingstreet · 26 September 2017 at 10:48AM

Letting agents have far too much power over tenants as it is.

They can determine how much of a deposit is returned and what 'damage' they feel warrants retention.

I would not, on any planet ever, want letting agents to be able to influence a tenant being able to get any kind of credit; the kind of influence they would have if they were permitted to feed data to CRAs.

Some lenders do ask applicants for evidence of rent payments.

Paying rent or indeed paying an existing mortgage is very much an expectation of a lender, rather than a positive/negative and isn't something which does (or should IMHO) trump someone's overall financial/credit history.

stator · 26 September 2017 at 12:11PM

The mortgage affordability rules have gone too far and mortgage lenders are being too discriminatory, not because they don't want to lend money and risk the borrower defaulting, but because they don't want to fall foul of regulatory tickbox rules.
So yes, I think some kind of official system is needed to record and provide the rental payment information to mortgage lenders and the regulators should allow lenders to take this into account.
This could simply be a form that landlords/rental agents are required to provide, on request, for a nominal sum, that gives details of past rental payments made on time.

ACG · 26 September 2017 at 12:25PM

The mortgage affordability checks lenders do are based on a certain rate, they are not based on the rent you pay at the minute. I do regularly hear people say I pay £x in rent, I can afford a Mortgage. That may be true whilst rates are at rock bottom but that is not what lenders are checking affordability against. Typically they are assessing the applicants against rates of closer to 10%.

I have never had anyone declined because they pay rent and can not evidence it on a credit report (as far as I am aware). If an underwriter is overly concerned, then they could ask for bank statements to evidence the payments. Barclays and Pepper tend to do this on most cases as standard, I am sure there are others but those 2 spring to mind.

amnblog · 26 September 2017 at 12:27PM

The Government's response here is in line with the focus of post 2008 regulation. Cannot see this going anywhere. As KS says, paying your rent in full and on time is a minimum. A property owner has potential higher costs and risk than a renter which is reflected in current affordability calculations.

wantonnoodle · 26 September 2017 at 1:11PM

When we bought our house last year, our lender wanted to see bank statements showing evidence of our rental payments being made consistently on time. So, some lenders are already reviewing the ability to pay rent.

getmore4less · 26 September 2017 at 1:17PM

Landlords(AST,lodgers house shares etc) having to report rent payments to another organisation.

How many forget to let HMRC know.

tom9980 · 26 September 2017 at 1:58PM

Why when a bank simply should ask for 12 months statements and a copy of the tenancy agreement. This will show how much rent is due and the statements can confirm it has been paid on time.

Governments creating more red tape and admin is not something anyone should welcome.

Lysimache · 26 September 2017 at 11:04PM

It would be useful for Parliament to review how typical mortgage providers assess different types of income. One person earning £50k regularly may be viewed differently to another person earning £50k regularly from other sources - and the income multiplier used by banks may offer those two people very different sizes of mortgages.

This can often feel very unfair to people taking out a mortgage, especially if they have reliable incomes but the unusualness of their income forces them to go to smaller mortgage companies or providers with higher rates.

For example, junior doctors often find their out of hours income - even though the out of hours work is regular, predictable and expected, and compulsory - is not counted 100% as income because many mortgage firms do not view it the same as 'basic income'.

This means many can only access mortgages via brokers or have a smaller choice of lenders, increasing costs. It can come as a shock to them that their income is viewed as iffy.

Lysimache · 26 September 2017 at 11:14PM

Another problem is some people may have stable jobs but work on 6-monthly contracts at a time. The full extent of these people's income can again be ignored by some mortgage providers but not others when calculating the max mortgage value to lend on. More consistency and more openness in how income is calculated and viewed by different providers when they do their affordability calculations would help open up more of the market to such people.

'Computer says no' due to odd rules on what counts as full income or doesn't is very frustrating.

Have your say on rent as evidence that people can meet mortgage repayments

Comments

Categories

Get our FREE Weekly email full of deals & guides - and it’s spam-free